In a dramatic reassessment of UK student finance, the government estimates around 45 percent of graduates will be unable to pay back their loans. The shortfall could cancel out the profits made by the disputed tripling of tuition fees in 2012.

British Universities Minister David Willetts has said that the
amount of graduates who will fail to pay back their student loans
has greatly exceeded previous estimates. Before tuition fees were
increased threefold in 2012, the government predicted that only
28 percent of loans would ever be paid back. However, in light of
projections for the coming years, the government has reassessed
this figure and almost doubled it to 45 percent.

This increase could potentially nullify the 10 billion pounds
($16 billion) in profits made by increasing tuition fees to 9,000
pounds ($15,000) a year in 2012. If the amount of students unable
to pay back their loans grows to 48.6 percent, economists predict
the government will start losing more money.

When the tuition fee hikes came into effect, the Conservative
government hailed them as progressive and a way of allowing
universities to make the money back they had lost in state
funding. Rival party Labour condemned the move as a
“tragedy” for a generation of young people, while the
National Union of Students called the threefold increase an
“outrage.” The reform triggered widespread protest
across the country.

Labour’s shadow Universities Minister Liam Byrne told the BBC
that the latest figures are evidence that the new system has made
no difference to students as “so few students can afford to
ever pay their debts back.”

“It is clear we have built the student finance system on top
of a money pit. I am afraid it can't go on and we now need a
debate about how we are going to pay for higher education and the
nation's universities in the decade ahead,” said Bryne.

Furthermore, Commons committee chairman, Adrian Bailey, described
the current situation as a “fiscal timebomb” to The
Guardian and said the government would have to address the issue
or face the consequences.

British graduates begin to pay back their student loans when they
start earning above a certain wage bracket. Under the old system,
if graduates earned above 15,000 pounds ($24,000) a year they
were required to start repaying their loan in monthly
installments. At present graduates begin to pay off their loan
once they have an annual salary that exceeds 21,000 pounds
($34,000) a year.

However, the onset of the financial crisis and an increase in the
number of graduates in the UK has pushed up youth unemployment
over the past year. According to government figures, unemployment
currently stands at 7.2 percent, while youth unemployment is much
larger - 19.8 percent. Between November 2013 and January 2014,
912,000 people aged between 16 and 25 were out of work.

As a result of the recession, living standards have fallen across
the board in the UK since 2010, according to data by the
Institute of Fiscal Studies.